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The growth dynamics of the Turkish economy and its impact on the unemployment

Keywords: Economic growth , unemployment , current account deficit , the real exchange rate , growth models.

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Abstract:

The main purpose of this study is to present the growth dynamics of the Turkish economy and discuss the sustainability of these dynamics. Throughout this argument, it is also possible to trace some evidences of the impact of growth on the unemployment. Firstly, it is evident that growth depends on first, import -due to cheap foreign exchange- and second, high level of foreign capital inflow in the financing of import -due to the insufficiency of export revenues. In addition to that, the policy of high interest rate - low level of foreign exchange is the source of the foreign capital inflow. Secondly, import-oriented growth in the economy has shifted towards a situation in which growth rate increases with the increase in the current account deficit and growth rate declines with a decline in the current account deficit, in the last analysis. Finally, when we analyze the growth performance and the unemployment rates correspondingly, it appears that the rate of unemployment will not decrease with the growth rates below 5%. Briefly, the only way of decreasing the unemployment level is to grow 5% or more every year. Central Bank has initiated the low interest rate-more realistic foreign exchange policy as of 2011 to restrain the unsustainable current account deficit. Finding this policy a promising one, we developed additional policy proposals in the light of the growth models in the literature to achieve a growth rate over 5% which is sustainable and not causing unemployment.

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